S&P has left the country's AA+ with a stable outlook unchanged. Photo: 123RF
New Zealand's credit rating has been reaffirmed by S&P Global Ratings on expectations the economy and government finances will recover from the impact of the pandemic.
The firm, one of the big three global ratings agencies, has left the country's AA+ with a stable outlook unchanged.
"New Zealand's economy is performing well, underpinned by low unemployment and pent-up demand. This is despite the after-effects of the Covid-19 pandemic, and rapidly rising inflation and interest rates," the agency said in a statement.
"We expect the strong rebound in economic activity and the ceasing of pandemic related-support measures to narrow New Zealand's fiscal deficit from pandemic highs.
"This will ease pressure on the government's debt trajectory even as debt servicing costs rise reflecting global interest rates. New Zealand managed the pandemic better than most countries in terms of health, fiscal, and economic outcomes."
It said it was expecting the economy to grow an average 2.5 percent a year between now and 2025, with inflation falling back into the Reserve Bank's 1-3 percent target band in 2024, the level of government debt levelling out at 30 percent of the value of the economy.
S&P said inflation was a downside risk to its forecasts, and if the government deficit did not shrink as expected leading to substantially higher interest the risk of a rating downgrade would increase, but a rating upgrade was possible on the back of smaller deficits and a marked drop in debt levels.
Of the other ratings firms, Fitch is the same as S&P, while Moodys has the country with the top tier triple-A.
The stronger a credit rating the easier it is for governments to raise money internationally at favourable interest rates.